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$1.3 Billion Buys Giant Brooklyn Complex

Delphine Speller, a 10-year resident of the Starrett City apartments, waited Thursday with other protesters to speak to David Bistricer, one of the new owners.Credit
Jeremy M. Lange for The New York Times

An investment group agreed at 3 a.m. yesterday to buy Starrett City, the sprawling low- and moderate-income apartment complex on Jamaica Bay in Brooklyn, for $1.3 billion, a price that experts say illustrates an exuberant real estate market.

The sale already promises to turn into a flashpoint in the escalating battle over affordable housing for poor, working-class and even middle-class New Yorkers. The deal was only hours old yesterday morning when about 100 tenants and organizers from Acorn, a national housing group, arrived by bus at the offices of one of the buyers, David Bistricer, in Borough Park, Brooklyn, chanting: “We love it. We need it. Don’t take Starrett away.”

The city is in the midst of a seven-year housing construction boom, yet apartment vacancies remain low and rents are spiking. At the same time, real estate investors are moving beyond glamorous office and apartment towers to pay what were until recently unheard-of prices for meat-and-potatoes housing.

Tenants, housing advocates, politicians and state and city officials say that the 46 brick towers with 5,881 apartments at Starrett City should remain an affordable haven for working- and middle-class families. They are concerned that the new owners will raise rents to justify the breathtaking price, or cut services at the complex, which has its own shopping center, schools, churches, synagogues, a power plant and an armed security force. Starrett is the largest federally subsidized housing complex in the country.

The buyers, Clipper Equity L.L.C., a partnership led by Mr. Bistricer and Sam Levinson, outbid six rivals in an auction by the longtime owners, Starrett City Associates, led by Disque Dean. They say that there is great potential to develop luxury and affordable housing on vacant parcels in the 140-acre complex wedged between Canarsie and East New York, which was recently renamed Spring Creek Towers.

Although Mr. Bistricer said in an interview yesterday afternoon that the new owners planned to buy out of the state’s Mitchell Lama program for middle-class families, he insisted that Starrett’s existing buildings would remain affordable.

“We’re not ready to get into specifics,” said Mr. Bistricer, who was clearly uncomfortable in the limelight and declined to be photographed. “We can say we’re committed to long-term affordability.”

Mr. Bistricer said he wanted to talk to tenants at Starrett and state and city officials to develop what he called a “consensus.”

There is no question that Clipper Equity paid a high price, roughly $221,000 for each apartment at Starrett City. Last year, Apollo Real Estate Advisors and Taconic Partners paid $90 million, or $91,556 per apartment, for Fairfield Towers, a complex opposite Starrett on Flatlands Avenue.

“That number is amazing,” Dan Fusolo of Real Capital Analytics, which tracks real estate transactions, said of the Starrett City deal. “It’s much higher than it would have been even a few years back. It’s a very bullish bet on the future of New York City and the eventual loosening of rent regulations.”

That is what worries tenants and housing advocates.

“To me it’s a safe haven,” said Michael Adam, 19, the son of a police officer, who grew up in Starrett City and joined the protest yesterday. “Right now my parents can help me pay for my college without being worried about being thrown out. My father just retired. He can’t handle a rent increase.”

Another resident asked, “Where will I go?” She is Bernice Barson, 66, a retired customer service clerk who has lived at Starrett for 18 years and pays $500 a month for her two-bedroom apartment. “I can’t afford what’s outside.”

John Brown, 68, a retired sanitation worker, who pays $1,200 for his two-bedroom apartment, said: “At this age, where are we going? We’re mostly retired people living on pensions.”

The protesters crowded into the lobby for about an hour and slipped a letter under Mr. Bistricer’s door asking the buyer to meet with Acorn. They left when the police ordered them out of the building.

The affordable housing issue came to the fore last year, with the record-breaking $5.4 billion sale of Stuyvesant Town and Peter Cooper Village in Manhattan. Mr. Bistricer and Mr. Levinson were part of a group led by a New York billionaire, Simon Glick, who bid for those two complexes.

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Most state and city officials kept silent about that sale, but they have been more active on the Starrett City sale. Gov. Eliot Spitzer has indicated that he wants the complex to remain affordable and economically and racially mixed. The state holds the $234.4 million interest-free mortgage for Starrett City and could, together with the federal Department of Housing and Urban Development, reject the new owner.

“Starrett is an important and very complicated project,” said Priscilla Almodovar, president of the state’s Housing Finance Agency. “There are three levels each of government, review and subsidy. We, therefore, need more information before we can comment.”

Starrett City was designed in the 1970s as a subsidized, middle-class co-op under the state’s Mitchell-Lama program. But the complex had some difficulty attracting tenants. Over time, it acquired a latticework of state and federal subsidies for low-, moderate- and middle-income tenants. Any new owners would have the right to drop out of the subsidy programs. But if they sought to build a new development on vacant parts of the site, the Bloomberg administration would have leverage, because that would require an environmental review and city approval.

Real estate executives involved in the sale had initially identified another company owned by Mr. Bistricer, Berkshire L.L.C., as the buyer, but he said yesterday that those reports were mistaken.

Mr. Bistricer said that 90 percent of the tenants would be eligible for federal rent vouchers. He said he planned to “devise a plan that works” for the rest. But tenant advocates contend that hundreds of tenants could face rent increases and that some of them might have to move to smaller apartments, which may not be available.

City and state officials did not immediately embrace the prospective owner, Clipper Equity. Indeed, Shaun Donovan, the city’s housing commissioner, questioned Mr. Bistricer’s role as a landlord, saying records indicated that there were 8,792 outstanding maintenance code violations involving 4,768 apartments in 71 of his buildings.

“The condition of Bistricer’s buildings and the number of outstanding housing maintenance code violations is of serious concern,” Mr. Donovan said. He added that the Bloomberg administration “will do everything we can to support the state’s efforts to preserve Starrett City as an affordable Mitchell-Lama complex.”

Mr. Bistricer said that most of the violations were at Flatbush Gardens, a large and deeply troubled complex in East Flatbush that he and Mr. Levinson bought about 18 months ago. Since then, he said, they have poured millions of dollars into renovating apartments and installing new elevators in all 59 buildings.

“It had troubled times in the past,” he said. “We saw there was an opportunity to clean it up and bring it back to life.”

Tenant organizers from Acorn, however, said that while conditions have improved at Flatbush Gardens, which had been known as Vanderveer Estates, problems remained.

Mr. Donovan also questioned Clipper Equities’ tentative plans to develop thousands of condominiums and subsidized rental apartments at Starrett City. Mr. Bistricer estimated that there is as much as five million square feet of development space.

He also questioned how much new housing is feasible at the site, given that much of the property is built on a landfill, with what he called “little infrastructure.” And if the property leaves the Mitchell-Lama program, officials estimate that property taxes would go up at least $12 million, from $3.7 million.

“Because of the limited market potential in the area,” Mr. Donovan said, “we would expect any new development to require unusually large government subsidies to be economically feasible, and that is unlikely to happen.”

Ann Farmer contributed reporting.

A version of this article appears in print on , on Page B1 of the New York edition with the headline: $1.3 Billion Buys Giant Brooklyn Complex. Order Reprints|Today's Paper|Subscribe